The Lufthansa Group reports upward trend in earnings in the second quarter

02.08.12

Group earns operating profit in the second quarter and reduces its operating loss for the half-year to EUR 20m / Forecast for 2012 confirmed: operating profit in the medium three-figure million euro range

Deutsche Lufthansa AG reported an upward trend in earnings performance in the second quarter of this year. In the period from April to June, the Group earned an operating profit of EUR 361m, nearly making up the loss sustained in the first quarter. Positive factors included consistent capacity and yield management in passenger and cargo traffic, clear restructuring successes at Austrian Airlines and good earnings contributions from the service companies. In the first six months of the year, the latter all increased their operating profit in comparison with the same period last year. High fuel costs, persistent price pressure, the air traffic tax payable in Germany and Austria and fees for emissions trading certificates all diminished the Group's profit, however. At the end of the first half-year 2012, the Company recognised an operating result of EUR -20m, EUR 134m less than in the same period last year. The Lufthansa Group increased its revenue by six per cent to EUR 14.5bn. After six months the net loss for the period came to EUR 168m, which represents an improvement of EUR 38m on last year. This includes a result from discontinued operations of EUR 36m, reflecting the closing of the sale of British Midland Ltd.

Presenting the half-year figures, Simone Menne, Chief Financial Officer and responsible for Aviation Services of Deutsche Lufthansa AG as of 1 July 2012, said: “By acting systematically, we want to ensure that we can continue to invest for our customers, secure and create jobs for our staff and maintain our profitable growth. We cannot avoid taking some unpleasant steps, but they will not comprise quality. The positive earnings performance and the lower unit costs in the second quarter give us confidence that it is worth the effort.” As part of its SCORE programme, the Group wants to improve its operating result compared with the year 2011 by at least EUR 1.5bn by the end of 2014.

The airlines in the Passenger Airline Group business segment pursued their strict capacity and yield management in the second quarter and all successfully increased their load factors and traffic revenue. It was the rise in fuel costs compared with last year which essentially caused the segment to record an operating loss of EUR 179m (previous year: EUR -100m). The operating segment is again adjusting its capacity growth with the aim of continuing with the positive sales and earnings performance. In its winter flight plan 2012/2013, the Passenger Airline Group plans to cut available seat-kilometres year on year by 2.5 per cent. This means growth will be cut to 0.5 per cent for the full 2012 year.

Lufthansa German Airlines is using the capacity reduction to phase out older aircraft ahead of schedule and for seasonal adjustments to the flight timetable. The company is removing European connections from Frankfurt to Casablanca, London-Gatwick, Larnaca, Palma de Mallorca and Naples from the winter flight plan, in addition to the alterations previously adopted. The capacity measures implemented in the first half-year, along with higher traffic revenue, did have a positive effect on the company's earnings, but were not able to make up for higher fuel expenses and costly increases of fees and charges. Lufthansa German Airlines reported an operating loss of EUR 300m (previous year: EUR -146m) for the first six months. SWISS remained profitable, earning an operating profit of EUR 48m. High fuel costs and the strong Swiss franc nevertheless meant that this was well below last year's good result of EUR 104m. Austrian Airlines successfully completed important restructuring measures by transferring its operations to Tyrolean Airways, thus taking another step towards becoming competitive. This resulted in positive non-recurring effects, enabling the company to generate an operating profit of EUR 26m (previous year: EUR -64m) in the first half-year. Without this effect the operating result would have come to EUR -55m. In the Logistics segment the high price of oil and lower demand for logistics services adversely affected the course of business, as did the strict night-flight ban at the hub in Frankfurt. The half-year operating result of EUR 47m (previous year: EUR 133m) is positive, although well below last year.

In a challenging first half of 2012, the Lufthansa Group profited in particular from its business model: all the service segments increased their operating profit compared with last year. For Lufthansa Technik the figure for the first six months of the year was EUR 144m (previous year: EUR 106m), an increase of 35.8 per cent. The Catering segment improved its operating result to EUR 23m (previous year: EUR 21m) and the IT Services segment reported an operating profit of EUR 8m (previous year: EUR 6m).

For the full year the Group is still expecting demand to be positive and is planning to continue its restrictive capacity management. At the same time, developments in fuel prices and the influence of macroeconomic factors remain hard to predict. The Group is still forecasting increased revenue and an operating profit in the mid three-figure million euro range for the full year. This forecast does not include restructuring costs in connection with the SCORE programme and the planned reduction of jobs included in it. On present estimates these will come to between EUR 100m and EUR 200m for the current year.

The first half-year of 2012 in figures

In the first half-year of 2012, the Lufthansa Group's revenue totalled EUR 14.5bn - an increase of 6.0 per cent on the same period last year. Traffic revenue improved by 5.4 per cent to EUR 11.9bn. Overall, the Group's operating income went up to EUR 15.6bn in the reporting period, an increase of 3.5 per cent.

Operating expenses rose by 5.7 per cent in the first half-year to EUR 15.6bn. One of the main reasons was the EUR 642m rise in fuel costs, which came to EUR 3.6bn in total. This represents an increase of 22 per cent. Included in this amount is a positive contribution of EUR 154m from price hedging. Fees and charges were up 4.5 per cent on the previous year.

The Lufthansa Group reported an operating result of EUR -20m in the first half-year, down by EUR 134m in comparison with the previous year. The net result for the period was EUR -168m. Last year the corresponding figure was EUR -206m. Earnings per share improved to EUR -0.37 (previous year: EUR -0.45).

Lufthansa invested EUR 1.4bn in the reporting period. Of this sum, EUR 1.2bn went on expanding and modernising the fleet. Cash flow from operating activities comes to EUR 1.7bn and free cash flow (cash flow from operating activities less net capital expenditure) to EUR 584m. At the end of the first six months of the year the Group has net debt of EUR 2.3bn. Its equity ratio is 26.8 per cent.

Lufthansa Group

January-June 2012 2011

Change

Revenue

in €m

14.509

13.685

824

of which traffic revenue

in €m

11.851

11.243

608

Profit from operatingactivities

in €m

-49

272

-321

Operating result

in €m

-20

114

-134

Adjusted operating margin*

in %

0,2

1,2

-1,0

Net profit

in €m

-168

-206

38

Capital expenditure

in €m

1.385

1.437

-68

Cash flow from operating activities

in €m

1.662

1.692

-30

Employees as of 30.06

117.416

118.766

-1.350

Earnings per share

€

-0,37

-0,45

0,08

*) Operating result plus write-backs of provisions, divided by revenue

Disclaimer in respect of forward-looking statements Information published in this press release concerning the future development of the Lufthansa Group and its subsidiaries consists purely of forecasts and assessments and not of definitive historical facts. These forward-looking statements are based on all discernible information, facts and expectations available at the time. They can, therefore, only claim validity up to the date of their publication. Since forward-looking statements are by their nature subject to uncertainties and imponderable risk factors - such as changes in underlying economic conditions - and rest on assumptions that may not occur, or may occur differently, it is possible that the Group's actual results and development may differ materially from the forecasts. Lufthansa makes a point of checking and updating the information it publishes. It cannot, however, assume any obligation to adapt forward-looking statements to subsequent events or developments. Accordingly, it neither explicitly nor implicitly accepts liability, nor gives any guarantee, for the actuality, accuracy or completeness of this data and information.